Gair v Federal Commissioner of Taxation [1944] HCA 29

THE FEDERAL COMMISSIONER OF TAXA-

HIGH COURT [1944.

[HIGH COURT OF AUSTRALIA,]

(CAE e i 3 i : : ; APPELLANT ;

AND

TION } RESPONDENT.

H.C, of A. Income Tax (Cth.)—Assessment—Assessable income—Second mortgage of interest in

1944, ey,

Mezzourns, Oct. 45 Nov. 6.

Latham CJ.,

estate of deceased person—Security for repayment of principal sum on certain date with interest thereon in the meantime—Assignment of morigage—Payment of lump sum in discharge of mortgage and arrears of interest—Sum sufficient to cover only principal sum and arrears of interest (if payable after date for repayment of principal sum) to date of assignment—Whether any part of sum included in assessable income—Income Tax Assessment Act 1936-1941 (No. 27 of 1936— No, 69 of 1941).

Under a second mortgage of an interest in the estate of a deceased person to secure the repayment of the principal sum of £2,374 on 31st January 1924, the mortgagor covenanted that he would "in the meantime pay interest on the said sum" at the rate of £8 per cent per annum, there being no further covenant for the payment of interest. No interest was at any time paid under the mortgage. The mortgage was assigned several times, the final assignment being made in 1934 to the appellant. In 1939, the trustees of the estate of the deceased person discharged the first mortgage and paid the balance of the estate to the appellant in a lump sum of £4,760, This sum was sufficient to cover only the principal sum, interest to 31st January 1924 (£189 19s., which had been capitalized under the terms of the mortgage) and interest (if payable) at the same rate and as reduced after Ist October 1931 under the Financial Emergency Acts (Vic.) from 31st January 1924 to the date of the assignment to the appellant (£2,046 13s.). Out of the sum of £4,760 the

appellant appropriated the sum of £2,374 to the discharge of the principal sum.